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State of Gujarat v. M/s. Kothari & Associates

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 1770 of 2005)Decided 16 Oct 2015
Civil Appeal No. 1770 of 2005
Justice Vikramajit Sen · Justice Shiva Kirti Singh

Background

The State of Gujarat awarded a contractor the work of lining a main canal, with a set working period. The contractor said the State repeatedly handed over the site late, so the work dragged on through several extended seasons, and each time the State refused to pay compensation for the extra costs. The contractor signed the final bill under protest in 1982, sent a statutory notice in 1983, and filed a suit for damages in January 1985. The trial court decreed about Rs 13.6 lakh, and the High Court enlarged the interest awarded.

Decision Breakdown

The Supreme Court allowed the State's appeal and dismissed the contractor's suit as time-barred. The Court held that a claim for damages is not a "debt", so the acknowledgement-and-payment rule in Section 19 of the Limitation Act, 1963 did not restart the clock, and the payment of the final bill and security deposit did not amount to an acceptance of the damages claim. The statutory notice under Section 80 of the Civil Procedure Code, dated 7 August 1983, came after the limitation period for the last alleged breach (ending 15 November 1982) had already run, so it could not extend the time. The State had also expressly rejected each compensation demand, so there was no silent acceptance.

Lesson Learnt

Legal time limits for suing are strict. A contractor or any other claimant must file within the limitation period, and paying a final bill or sending a late legal notice does not extend that deadline. Claims should be raised in writing and pursued in court on time.

Official source (sci.gov.in)View Judgment (PDF)

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